PHUKET CONDOMINIUM - Knight Frankcontent.knightfrank.com/research/433/documents/en/2016-phuket...Phuket Condominium Supply, 2007 – 2016 ... also cater to the hotel rental programme

PHUKET CONDOMINIUMMARKET REPORT 2016

RESIDENTIAL RESEARCH

2

2007 2008 2009 2010 2011 2012 2013 2014 2015-266 -434

2016

Existing Supply New Supply New Supply

740

896

662

1,63

632

6

2,29

814

3

2,62

41,

447

2,76

72,

410

1,92

84,

214

6,62

41,

302

8,55

21,

792

9,85

41,

843

11,3

80

FIGURE 1

Phuket Condominium Supply, 2007 – 2016

FIGURE 2

2016 Phuket Condominium Supply by View

HIGHLIGHTS

RISINEE SARIKAPUTRADirector, Research and Consultancy

“Phuket condominium saw a market transforma-tion similarly to what have already been seen in Bangkok. Developers are choosing to reduce the unit sizings to lower the unit price making their projects more attractive to buyers from emerging markets”

Supply

As of 2016, there were approximately 12,789 units, a net increase of 1,409 units from last year—representing an increase of 12.4% over last year’s supply. There were 1,843 units from 10 projects being launched and 434 units from 4 projects that were launched in the previous year that have now ceased their sales. Dinso Residence and Emerald City Life Building A were the two developments that have since converted into hotels, and the latest phase of Twin Sands is now operating and selling as a time share product. Ace Condominium in Patong has currently been halted indefinitely. A closer look at the 2016 supply shows that Surin and Kamala beaches have the largest number of new supply at 587 units (34% of the total 2016 supply) and 417units (24% of the total 2016 supply), respectively.This shows that Northern Phuket beaches remain popular among developers.

• Therewere1,843unitsfrom10

new condominium projects being

launched within this year. However,

4 projects are cancelled and being

repurposed or permanently ceased

the sales.

• SurinandKamalasawthelarg-

est increase in supply at 587 units

whilst seaview products significantly

made up more of the new supply

this year more than in 2015.

• Accumulatedsoldrateisthehigh-

est rate since 2007 at 68.1%.

• Russianbuyersarebackinbusi-

ness after being mostly absent in

2015 due to the Russian currency

crisis.

• Averagepriceroseby3.5%but

the strongest price growth recorded

was in the non-seaview market.

Source : Knight Frank Thailand’s Research


Meanwhile, unit prices of the new supply seem to have increased from the supply of 2015 where almost all, with an exception of one project—the Residences at Mont Azure in Kamala, were mid-range to lower market units with an average unit starting price of THB 3.2 million. This year, most of the supply came from mid-range projects and above, with an average unit starting price of THB 3.8 million. Almost half of this year’s supply enjoyed partial seaviews. Interestingly, seaview projects constitute a significant proportion of this year’s supply compared to 2015 due to a new project type that proved popular among developers: mostly one-bedroom full seaview projects which are constructed on sites previously deemed more suitable for villa development. Examples of these include the Aristo Patong and Himalai Oceanfront projects.

Seaview 29 %

Non-Seaview 25 %

Partly Seaview 46 %

3

2011

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2012 2013 2014 2015 2016

Non-SeaviewPartly SeaviewSeaview

62,100

84,500

120,540128,700

139,680

157,450

172,569178,900

86,700 88,500 91,658 97,789 98,355

63,800 65,140 67,850 67,859 72,817

FIGURE 3

Phuket Condominium Supply, Demand and Sold Rate, 2007-2016

RESIDENTIAL RESEARCHPHUKET CONDOMINIUM 2016

It is important to note that the Phuket condominium market has seen a product transformation since 2012. Prior to that, the majority of the units were much larger at over 100 square metres—whereas after that, unit sizes of newer supply are reduced to reflect buyers’ changing demographics and preferences, and to also cater to the hotel rental programme where purchased units could be part of a 3-star and above hotel inventory, generating income for unit owners.

Demand

This year, out of 12,789 units, approximately 8,706 units have been sold—constituting an accumulated sold

rate of 68.1% -- the highest recorded rate since 2007. Approximately 1,250 units were sold in 2016, which is in line with recent years’ market take-up rate of around 1,200 to 1,400 units per year. The Phuket condominium market relies heavily on foreign buyers and it has shown to be more sensitive to the global economic conditions than local political and economic conditions. Prior to 2012, the Phuket condominium market saw annual unit take-ups of lower than 700 units due to two major reasons: (1) the 2008 financial crisis which churned western buyers; and (2) unit sizes were larger and were not often sold as investment products. From 2012 onwards, annual take-ups rose to more than a thousand units, despite the Thai coup d’état in 2014.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2,000

4,000

6,000

8,000

10,000

12,000

14,000

-

Supply Demand Sold Rate

1,63

6

48.8% 49.8%

54.6%

64.8%

56.9%54.4%

59.0%

65.3% 65.5%68.1%

2,29

8 1,14

42,

624 1,

433

2,76

7

1,79

44,

214

2,39

96,

624

3,60

48,

552

5,04

29,

854

6,43

611

,380

7,45

612

,789

8,70

6

799



Previously the majority of Phuket condominium buyers were either expatriates based in East and Southeast Asia; or Western Europeans who wished to have a second home for their own uses during the European winter. This year, similar to last year, there has still been an increase in Chinese, Taiwanese and Singaporean buyers. Russian buyers are also back in the market this year after having been mostly absent in 2015 due to the Russian currency crisis. This also explained the growing appetite for small one-bedroom units being supplied in recent years.Our research has also shown that, apart from the Chinese buyers, many Phuket condominium buyers are familiar with Phuket and are not first time visitors. They carefully explore their options and take longer to make purchase decisions especially with off-plan projects. Unlike Bangkok condominium buyers, Phuket buyers’ purchase decisions depend relatively heavily on the possibility of rental income generation; hence, there is growing demand for professionally managed properties in 2016.

Selling Price

The average selling price of Phuket condominiums in 2016 increased by 3.51% from last year, with the highest increase of 7.31% recorded in non-seaview products, currently averaging at THB 72,817 per square metre. The seaview condominium saw a slightly better than overall average per square metre price increase of 3.67% from last year, currently standing at approximately THB 178,900 per square metre. Meanwhile, the partial seaview products saw a modest positive change in price with only 0.58% increase in price from last year, standing at THB 98,355 per square metre.Based on our findings, the non-seaview products saw the highest increase in price because of the surge in demand from buyers from emerging economies and the introduction of rental return guarantees being run by developers of these non-seaview projects. In contrast, the partial seaview products are currently facing a very high level of competition with 849 new units entering the market this year alone. There are currently 3,631 unsold units from partial seaview projects currently available out of the total partial seaview supply of 5,193 units.

FIGURE 4

Average Selling Price of Phuket Condominium per Square Metre, 2011-2016

4

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GLOBAL BRIEFING

Thailand Contacts

Phanom KanjanathiemthaoManaging Director+66 (0)2643 8223 Ext [email protected]

Chaturawit WattanaprukExecutive Director+66 (0)2643 8223 Ext [email protected]

Surasak Limpa-ArayakulExecutive Director, Head of Valuation and Advisory+66 (0)2643 8223 Ext [email protected]

Roong SitthisankunchornExecutive Director, Head of Property Management+66 (0)2643 8223 Ext [email protected]

Marcus BurtenshawExecutive Director, Head of Commercial Agency+66 (0)2643 8223 Ext [email protected]

Frank KhanExecutive Director, Head of Residential +66 (0)2643 8223 Ext [email protected]

Risinee SarikaputraDirector, Research and Consultancy+66 (0)2643 8223 Ext [email protected] Phuket ContactNattha KahapanaExecutive Director, Knight Frank Phuket+66 (0)7631 8151 Ext [email protected]

Important Notice© Knight Frank LLP 2016 – This report ispublished for general information only andnot to be relied upon in any way. Althoughhigh standards have been used in the preparation of the information, analysis, viewsand projections presented in this report, noresponsibility or liability whatsoever can beaccepted by Knight Frank LLP for any loss ordamage resultant from any use of, reliance onor reference to the contents of this document.As a general report, this material does notnecessarily represent the view of Knight FrankLLP in relation to particular properties or projects. Reproduction of this report in wholeor in part is not allowed without prior writtenapproval of Knight Frank LLP to the form and content within which it appears. KnightFrank LLP is a limited liability partnership registered in England with registered numberOC305934. Our registered office is 55 BakerStreet, London, W1U 8AN, where you maylook at a list of members’ names.

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Market Outlook

In 2015 we have previously reported

that the Phuket condominium market

was showing signs of a slowdown. This

year, the market condition improved with

the annual unit take-up increasing by

22.6% mainly due to a significant group

of buyers, the Russians, being back in

business. We saw more upper market

projects being introduced into the market

this year in comparison to 2015. We

also saw affordable projects starting to

prioritise their sales strategies to cater to

the Chinese market with printed materials

at sales gallery available in Mandarin. In

terms of sales, Patong and Kalama were

the top selling beaches in terms of unit

sales—in particular newer one-bedroom

majority seaview projects enjoyed the

fastest pace of sales.

With the recent completion of the

new International Terminal at the

Phuket Airport, the currently under-

construction Central Phuket expansion,

and the upcoming planned transport

infrastructure upgrades, Phuket would

enjoy a better market outlook in the

following year. Phuket has consistently

remained isolated from the remainder of

the country’s economic slowdown and

the on-going political turmoil. As land

is becoming scarcer, the sales price of

the condominiums would also gradually

increase in times where there is still

demand. It is advisable for developers to

remain cautious in making development

decisions as buyers’ preferences are

now fragmented even further whilst new

products may not be able to satisfy their

needs. Beachfront condominium buyers

this year would be left with a limited

selection of new condominium projects

as none entered the market this year.

Appendix

Phuket condominium classification

Seaview condominium

Is defined as a condominium project that

has no beach frontage but with more

than 50% of the units enjoying a direct

view of the sea.

Partly seaview condominium

Is defined as a condominium project

that has no beach frontage, and less

than 50% of the units enjoy a direct

view of the sea.

Non seaview condominium


is located away from the beach and with

most units having no sea view.

Oceanfront condominium


has direct access to the beach and with

many of the units enjoying a direct view

of the sea.

Contributor to this report

Panon LeelamanitResearch Manager

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PHUKET CONDOMINIUM - Knight Frankcontent.knightfrank.com/research/433/documents/en/2016-phuket...Phuket Condominium Supply, 2007 – 2016 ... also cater to the hotel rental programme